Abbott Laboratories (ABT) reported first quarter 2013 earnings of 42 cents per share, in line with the Zacks Consensus Estimate and 5.0% above the year-ago earnings. Including one-time items, first quarter earnings decreased 56.4% to 34 cents per share.
Abbott Labs generated revenues of $5.4 billion in the first quarter of 2013, up 1.8% year over year and in line with the Zacks Consensus Estimate. The year over year growth was primarily driven by the Nutrition and Diagnostics segments.
However, unfavorable movement in foreign exchange rates negatively impacted revenues by 1.7%.
We note that the reported quarter is the first full quarter for Abbott Labs after having separated its proprietary pharmaceutical business into a new company called AbbVie (ABBV) on Jan 1, 2013.
Quarter in Detail
Abbott Labs now operates through four segments, namely Established Pharmaceuticals Division (EPD), Medical Devices, Diagnostics, and Nutritionals.
EPD sales declined 1.9% year over year to $1.2 billion including a negative impact of 1.9% due to currency fluctuation. This division primarily focuses on key emerging markets where sales grew 4.4%. However, sales in other markets which include developed markets, such as Western Europe and Japan, among others declined 7.0% primarily due to carry-over effects of austerity measures undertaken in Europe in 2012 and pricing actions in Japan.
Abbott Labs expects key emerging markets sales to grow in double-digits in 2013 – performance is expected to improve from the second quarter as the company strengthens its position in these markets. Meanwhile, performance in other countries should also improve from the second half of the year with the lessening of the impact of austerity measures and pricing actions.
The Medical Devices business generated sales of $1.3 billion, down 4.6% mainly due to a decline in the vascular business. The vascular business was down 7.7% due to an expected decline of certain royalty and supply arrangement revenues (including Promus) along with the negative impact from pricing. Diabetes Care sales declined 0.5% while Medical Optics sales declined 0.6%.
The Nutrition business grew 8.7% year over year to $1.7 billion fueled by solid growth in emerging markets which account for 45% of the total sales in this division. Nutrition sales in the US increased 2.1% to $718 million. Outside the US, sales grew 14.2% to $981 million. Pediatric Nutrition sales grew 13.2% while Adult Nutrition sales grew 3.1%.
Diagnostics business sales increased 4.4% year over year to $1.0 billion. Key areas of focus in this division include the Core Laboratory Diagnostics, Molecular Diagnostics, and Point of Care Diagnostics businesses. Core Laboratory sales increased 3.6% and Point of Care Diagnostics increased 17.3%. Worldwide sales of Molecular Diagnostics increased 0.7%.
2013 Outlook Reiterated
Abbott Labs continues to expect earnings per share in the range of $1.98 to $2.04 in 2013. The Zacks Consensus Estimate currently stands at $2.01 per share.
For the second quarter of 2013, Abbott Labs estimates earnings per share in the range of 43 cents to 45 cents. The Zacks Consensus Estimate of 45 cents per share is within the company’s guidance.
We believe that Abbott Labs is extremely diversified with a presence in the nutrition, diagnostics, generic pharmaceuticals and medical devices markets. In particular, the Nutrition business should maintain momentum and boost the bottom line due to an improvement in operating margins.
Abbott Labs currently carries a Zacks Rank #3 (Hold). As of now, Nuvasive (NUVA) looks attractive with a Zacks Rank #1 (Strong Buy). Exactech (EXAC) also looks well placed with a Zacks Rank #2 (Buy).
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